|
Report No. : |
324410 |
|
Report Date : |
04.06.2015 |
IDENTIFICATION DETAILS
|
Name : |
URBAN OUTFITTERS, INC. |
|
|
|
|
Registered Office : |
5000 South Broad Street, Philadelphia, PA 19112 |
|
|
|
|
Country : |
United
States |
|
|
|
|
Financials (as on) : |
30.04.2015 |
|
|
|
|
Date of Incorporation : |
06.08.1976 |
|
|
|
|
Legal Form : |
Public Company |
|
|
|
|
Line of Business : |
Subject is engages in the retail and wholesale of general consumer
products. |
|
|
|
|
No. of Employees : |
8,880 |
RATING & COMMENTS
|
MIRA’s Rating : |
Ba |
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
Status : |
Satisfactory |
|
|
|
|
Payment Behaviour : |
Slow but correct |
|
|
|
|
Litigation : |
Exist |
NOTES:
Any query related to this report can be made
on e-mail: infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – December 31, 2014
|
Country Name |
Previous Rating (30.09.2014) |
Current Rating (31.12.2014) |
|
United States |
A1 |
A1 |
|
Risk Category |
ECGC
Classification |
|
Insignificant |
A1 |
|
Low |
A2 |
|
Moderate |
B1 |
|
High |
B2 |
|
Very High |
C1 |
|
Restricted |
C2 |
|
Off-credit |
D |
UNITED STATES - ECONOMIC OVERVIEW
The US has the most technologically powerful economy in the world, with a per capita GDP of $54,800. In 2014, however, US GDP ran second to China’s, when compared on a Purchasing Power Parity basis; the US lost the top spot, where it had stood for more than a century. In the US, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals' home markets than foreign firms face entering US markets. US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II. The onrush of technology has been a driving factor in the gradual development of a "two-tier labor market" in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits. But the globalization of trade, and especially the rise of low-wage producers, has put additional downward pressure on wages and upward pressure on the returns to capital. Since 1975, practically all the gains in household income have gone to the top 20% of households. Since 1996, dividends and capital gains have grown faster than wages or any other category of after-tax income. Imported oil accounts for nearly 55% of US consumption. Crude oil prices doubled between 2001 and 2006, the year home prices peaked; higher gasoline prices ate into consumers' budgets and many individuals fell behind in their mortgage payments. Oil prices climbed another 50% between 2006 and 2008, and bank foreclosures more than doubled in the same period. Besides dampening the housing market, soaring oil prices caused a drop in the value of the dollar and a deterioration in the US merchandise trade deficit, which peaked at $840 billion in 2008. The sub-prime mortgage crisis, falling home prices, investment bank failures, tight credit, and the global economic downturn pushed the United States into a recession by mid-2008. GDP contracted until the third quarter of 2009, making this the deepest and longest downturn since the Great Depression.
To help stabilize financial markets, in October 2008 the US Congress established a $700 billion Troubled Asset Relief Program (TARP). The government used some of these funds to purchase equity in US banks and industrial corporations, much of which had been returned to the government by early 2011. In January 2009 the US Congress passed and President Barack OBAMA signed a bill providing an additional $787 billion fiscal stimulus to be used over 10 years - two-thirds on additional spending and one-third on tax cuts - to create jobs and to help the economy recover. In 2010 and 2011, the federal budget deficit reached nearly 9% of GDP. In 2012, the federal government reduced the growth of spending and the deficit shrank to 7.6% of GDP. Wars in Iraq and Afghanistan required major shifts in national resources from civilian to military purposes and contributed to the growth of the budget deficit and public debt. Through 2014, the direct costs of the wars totaled more than $1.5 trillion, according to US Government figures. US revenues from taxes and other sources are lower, as a percentage of GDP, than those of most other countries. In March 2010, President OBAMA signed into law the Patient Protection and Affordable Care Act, a health insurance reform that was designed to extend coverage to an additional 32 million American citizens by 2016, through private health insurance for the general population and Medicaid for the impoverished. Total spending on health care - public plus private - rose from 9.0% of GDP in 1980 to 17.9% in 2010. In July 2010, the president signed the DODD-FRANK Wall Street Reform and Consumer Protection Act, a law designed to promote financial stability by protecting consumers from financial abuses, ending taxpayer bailouts of financial firms, dealing with troubled banks that are "too big to fail," and improving accountability and transparency in the financial system - in particular, by requiring certain financial derivatives to be traded in markets that are subject to government regulation and oversight. In December 2012, the Federal Reserve Board (Fed) announced plans to purchase $85 billion per month of mortgage-backed and Treasury securities in an effort to hold down long-term interest rates, and to keep short term rates near zero until unemployment dropped below 6.5% or inflation rose above 2.5%. In late 2013, the Fed announced that it would begin scaling back long-term bond purchases to $75 billion per month in January 2014 and reduce them further as conditions warranted; the Fed ended the purchases during the summer of 2014. Long-term problems include stagnation of wages for lower-income families, inadequate investment in deteriorating infrastructure, rapidly rising medical and pension costs of an aging population, energy shortages, and sizable current account and budget deficits.
|
Source
: CIA |
Company name: URBAN OUTFITTERS, INC.
Address: 5000 South Broad Street, Philadselphia, PA 19112 - USA
Telephone:
+1 215-454-5500
Fax: +1 215-454-5163
Website: www.urbanoutfittersinc.com
Corporate ID#: 636814
State: Pennsylvania
Judicial form: Public Company (NASDAQ = URBN)
Date founded: August 6, 1976
Stock: 131,723,233 shares outstanding on 03-31-2015.
Value: USD
0.0001 par value
Name of manager: Richard A. HAYNE
Business:
Urban Outfitters, Inc., a lifestyle specialty retail company, engages in the retail and wholesale of general consumer products.
The company operates in two segments, Retail and Wholesale.
It serves its customers directly through retail stores, Websites, mobile applications, catalogs, and customer contact centers. The company operates retail stores under the Urban Outfitters, Anthropologie, Free People, Terrain, and Bhldn brands. The Urban Outfitters stores offer women’s and men’s fashion apparel, intimates, footwear, beauty and accessories, activewear and gear, and electronics, as well as an eclectic mix of apartment wares and gifts to young adults aged 18 to 28; and the Anthropologie stores’ product assortment includes women’s casual apparel and accessories, intimates, shoes, beauty, home furnishings and a diverse array of gifts and decorative items to women aged 28 to 45. Its Free People stores offer a merchandise mix of casual women’s apparel, intimates, shoes, accessories, and gifts to young women aged 25 to 30; Bhldn stores sell a collection of wedding gowns, bridesmaid frocks, party dresses, assorted jewelry, headpieces, footwear, lingerie, and decorations; and Terrain stores provide home furnishings and decorative items; garden products, including live plants and flowers; outdoor living furnishings; entertainment products; various gifts; and landscape and design services.
The Terrain stores also offer a full-service restaurant and coffee bar services.
As of January 31, 2015, the company operated 238 Urban Outfitters stores, 204 Anthropologie and Bhldn stores, 102 Free People stores, and 2 Terrain garden centers in North America and Europe.
Urban Outfitters, Inc. also operates a wholesale business under the Free People brand that designs, develops, and markets young women’s contemporary casual apparel to approximately 1,600 specialty stores and select department stores worldwide.
The company was founded in 1970 and is based in Philadelphia, Pennsylvania.
On May 18, 2015, Urban Outfitters Inc. announced its plan to open approximately 31 new stores in 2016.
By brand, it is planning approximately 4 new Urban Outfitters stores in North America, 13 new Anthropologie stores globally, including 1 new European store, and 14 new Free People stores in North America.
For fiscal year 2016, capital expenditures are planned at approximately $150 million to $160 million, driven primarily by new stores and the completion of the new East Coast fulfillment center. Finally, fiscal year 2016 annual effective tax rate is planned to be approximately 36.25%.
Office of the Foreign Assets Control (OFAC):
The company is not listed on the OFAC list.
The Specially Designated Nationals (SDN) List is a publication of OFAC which lists individuals and organizations with whom United States citizens and permanent residents are prohibited from doing business.
EIN: 23-2003332
Staff: 8,880
Operations
& branches:
At the
headquarters, we find the corporate headquarters, owned.
As of January 31, 2015, the company operated 238 Urban Outfitters stores, 204 Anthropologie and Bhldn stores, 102 Free People stores, and 2 Terrain garden centers in North America and Europe.
Shareholders:
As of 03-31-2015,
76% of the stock is held by institutional and mutual fund owners, including:
|
Massachusetts Financial Services Co. |
8.34% |
|
Vanguard Group, Inc. (The) |
5.86% |
|
State Street Corporation |
3.62% |
|
JP Morgan Chase & Company |
3.60% |
|
Bank of New York Mellon Corporation |
3.35% |
Management:
Richard D. HAYNE is the Chairman, President and Director.
Richard A. Hayne co-founded Urban Outfitters Inc. in 1970 and has been its President since incorporation in 1976. Mr. Hayne served as Principal Executive Officer of Urban Outfitters Inc. until May 22, 2007.
Mr. Hayne has been the Chairman of the Board of Directors since incorporation in 1976.
Mr. Tedford G. MARLOW, Ted has been the Chief Executive Officer of Urban Outfitters Group at Urban Outfitters Inc. since February 6, 2012.
Mr. Marlow served as the President of Indigo Books & Music Inc. since April 1, 2011. He served as Executive Director of Business Development at Urban
Outfitters Inc. and served as its President of Urban Brand Worldwide from July 2001 to April 12, 2010.
From September 2000 to July 2001, Mr. Marlow served as Executive Vice President of Merchandising, Product Development, Production and Marketing at Chico's FAS Inc.
He served as Senior Vice President at Saks Fifth Avenue from November 1998 to September 2000, where he was responsible for all Saks Fifth Avenue private brand product development. From January 1995 to November 1998, Mr. Marlow served as President and Chief Executive Officer of Henri Bendel, a division of The Limited, Inc.
He serves as Director of Indigo Books & Music Inc.
He will retire on August 28, 2015.
Mr. Francis J. CONFORTI has been Chief Financial Officer of Urban Outfitters Inc. since April 3, 2012.
Mr. Conforti has been the Chief Accounting Officer of Urban Outfitters Inc. since March 5, 2010 and Controller since February 2009.
Mr. Conforti has been with Urban Outfitters for three years. He served as Director of Finance and SEC Reporting at Urban Outfitters since March 2007. Mr. Conforti served as Principal Accounting Officer and Director, Accounting of Allied Security Holdings LLC, the holding company of AlliedBarton Security Services LLC. Mr. Conforti served as the Director of Accounting and Principal Accounting Officer of AlliedBarton Security Services LLC. He worked for AlliedBarton Security Systems LLC for five years, serving as Controller for three years.
He is a Certified Public Accountant.
Subsidiaries
&
Partnership: Several in the U.S. and
worldwide
On
attachment:
- 10K
2014
0n May 18, 2015, Urban Outfitters, Inc. announced net income of $33 million for the three months ended April 30, 2015. Earnings per diluted share were $0.25 for the three months ended April 30, 2015.
Total Company net sales for the first quarter of fiscal
2016 increased 8% over the same quarter last year to a record $739 million.
Comparable Retail segment net sales, which include our comparable
direct-to-consumer channel, increased 4%. Comparable Retail segment net sales
increased 17% at Free People, 5% at Urban Outfitters and 1% at the
Anthropologie Group. Wholesale segment net sales rose 18%.
Net sales by brand and segment for the three month period were as follows:
|
|
Three Months Ended
|
||
|
|
April 30, |
||
|
Net sales by brand |
2015 |
|
2014 |
|
Urban Outfitters |
$ 295,675 |
|
$ 277,656 |
|
Anthropologie Group1 |
311,376 |
|
299,983 |
|
Free People |
131,959 |
|
108,671 |
|
Total Company |
$ 739,010 |
|
$ 686,310 |
|
|
|
|
|
|
Net sales by segment |
|
|
|
|
Retail Segment |
$ 685,009 |
|
$ 640,430 |
|
Wholesale Segment |
54,001 |
|
45,880 |
|
Total Company |
$ 739,010 |
|
$ 686,310 |
For the three months ended April 30, 2015, the gross profit rate decreased by 141 basis points versus the prior year's comparable period. The decline in gross profit rate was primarily due to lower initial margins at the Urban Outfitters Brand and higher delivery and fulfillment expense across the entire company. The deleverage in delivery and fulfillment expenses were partially due to the increase in direct-to-consumer penetration and the beginning of the South Carolina fulfillment center transition to Gap, Pennsylvania.
As of April 30, 2015, total inventories increased by $49 million, or 14%, on a year-over-year basis. The growth in total inventories is primarily related to an increase in comparable Retail segment inventories and the acquisition of inventory to stock new and non-comparable stores. Comparable Retail segment inventories increased 8% at cost while decreasing 5% in units.
For the three months ended April 30, 2015, selling, general and administrative expenses, expressed as a percentage of net sales, increased by 13 basis points when compared to the prior year period. The increase was primarily due to increased marketing and technology expenses that were used to drive higher direct-to-consumer traffic.
The Company's effective tax rate for the first quarter of
fiscal 2016 was 35.6% compared to 37.0% in the prior year period. The tax rate
variance is due to state tax adjustments in the prior year quarter.
On May 27, 2014, the Board of Directors authorized the repurchase of 10.0 million common shares under a share repurchase program. During fiscal 2015, the Company repurchased and retired 7.7 million common shares for approximately $258 million under this authorization. During the first quarter of fiscal 2016, the Company repurchased 0.4 million shares for approximately $17 million under this authorization. On August 27, 2013, the Board of Directors authorized the repurchase of 10.0 million common shares under a share repurchase program. During the first quarter of fiscal 2015, the Company repurchased and retired 9.7 million common shares for approximately $353 million completing the August 27, 2013 share repurchase authorization. On February 23, 2015, the Board of Directors authorized the repurchase of 20.0 million shares under a new share repurchase program.
No shares have been repurchased under this authorization.
During the three months ended April 30, 2015, the Company opened a total of 7 new stores including: 4 Free People stores, 2 Anthropologie Group stores and 1 Urban Outfitters store. The Company closed 1 Urban Outfitters store.
Banks: JP Morgan Chase Bank
Bank of
America
The Bank
of New York
Legal filings & complaints:
There are several cases pending with various Courts.
Secured debts summary (UCC): Several
Trade
references:
Date reported: April 2015
High
credit: USD 80,000+
Now
owing: 0
Past
due: 0
Last
purchase: March 2015
Line of
business: Office supply
Paying
status: 8 days beyond terms
Date
reported: April 2015
High
credit: USD 11,000,000+
Now
owing: 0
Past
due: 0
Last
purchase: March 2015
Line of
business: Payroll
Paying
status: As agreed
Date
reported: April 2015
High
credit: USD 18,000
Now
owing: 0
Past
due: 0
Last
purchase: March 2015
Line of
business: Telecommunications
Paying
status: 7 days beyond terms
Domestic
credit history:
Domestic
credit history appears as follow:
Monthly Payment Trends - Recent Activity
|
Date |
Up to 30 DBT |
31-60 DBT |
61-90 DBT |
>90 DBT |
||
|
12/14 |
$12,007,800 |
67% |
24% |
5% |
2% |
2% |
|
01/15 |
$13,296,300 |
62% |
29% |
3% |
4% |
2% |
|
02/15 |
$11,888,100 |
60% |
32% |
4% |
1% |
3% |
|
03/15 |
$11,394,800 |
64% |
29% |
2% |
1% |
4% |
|
04/15 |
$10,826,200 |
67% |
29% |
2% |
1% |
1% |
|
05/15 |
$11,149,000 |
68% |
28% |
2% |
1% |
1% |
National
Credit Bureaus gave a medium credit rating.
According to our credit analysts, during the last 6 months, domestic payments were made with an average of 5 to 10 days beyond terms.
International credit history:
Payments of imports are currently made with an average of 5 to 10 days beyond terms.
Other
comments:
The
Company maintains a strong business.
The
Company is in good standing.
This
means that all local and federal taxes were paid on due date.
In spite
of late payments noted, the risk remains low.
Our
opinion:
A
business connection may be conducted.
Standard & Poor’s
|
United States of America Long-Term Rating Lowered To 'AA+' Due To
Political Risks, Rising Debt Burden; Outlook Negative |
|
Publication date: 05-Aug-2011 20:13:14 EST |
·
We
have also removed both the short- and long-term ratings from CreditWatch
negative.
·
The
downgrade reflects our opinion that the fiscal consolidation plan that Congress
and the Administration recently agreed to falls short of what, in our view,
would be necessary to stabilize the government's medium-term debt dynamics.
·
More
broadly, the downgrade reflects our view that the effectiveness, stability, and
predictability of American policymaking and political institutions have
weakened at a time of ongoing fiscal and economic challenges to a degree more
than we envisioned when we assigned a negative outlook to the rating on April
18, 2011.
·
Since
then, we have changed our view of the difficulties in bridging the gulf between
the political parties over fiscal policy, which makes us pessimistic about the
capacity of Congress and the Administration to be able to leverage their
agreement this week into a broader fiscal consolidation plan that stabilizes
the government's debt dynamics any time soon.
·
The
outlook on the long-term rating is negative. We could lower the long-term
rating to 'AA' within the next two years if we see that less reduction in
spending than agreed to, higher interest rates, or new fiscal pressures during
the period result in a higher general government debt trajectory than we
currently assume in our base case.
TORONTO (Standard & Poor's) Aug. 5,
2011--Standard & Poor's Ratings Services said today that it lowered its
long-term sovereign credit rating on the United States of America to 'AA+' from
'AAA'. Standard & Poor's also said that the outlook on the long-term rating
is negative. At the same time, Standard & Poor's affirmed its 'A-1+'
short-term rating on the U.S. In addition, Standard & Poor's removed both
ratings from CreditWatch, where they were placed on July 14, 2011, with
negative implications.
The transfer and
convertibility (T&C) assessment of the U.S.--our assessment of the
likelihood of official interference in the ability of U.S.-based public- and
private-sector issuers to secure foreign exchange for
debt service--remains 'AAA'.
We lowered our long-term rating on the U.S.
because we believe that the prolonged controversy over raising the statutory
debt ceiling and the related fiscal policy debate indicate that further
near-term progress containing the growth in public spending, especially on
entitlements, or on reaching an agreement on raising revenues is less likely
than we previously assumed and will remain a contentious and fitful process. We
also believe that the fiscal consolidation plan that Congress and the
Administration agreed to this week falls short of the amount that we believe is
necessary to stabilize the general government debt burden by the middle of the
decade.
Our lowering of the rating was prompted by
our view on the rising public debt burden and our perception of greater
policymaking uncertainty, consistent with our criteria (see "Sovereign
Government Rating Methodology and Assumptions ," June 30, 2011,
especially Paragraphs 36-41). Nevertheless, we view the U.S. federal
government's other economic, external, and monetary credit attributes, which
form the basis for the sovereign rating, as broadly unchanged.
We have taken the ratings off CreditWatch
because the Aug. 2 passage of the Budget Control Act Amendment of 2011 has
removed any perceived immediate threat of payment default posed by delays to
raising the government's debt ceiling. In addition, we believe that the act provides
sufficient clarity to allow us to evaluate the likely course of U.S. fiscal
policy for the next few years.
The political
brinksmanship of recent months highlights what we see as America's governance
and policymaking becoming less stable, less effective, and less predictable
than what we previously believed. The statutory debt ceiling and the threat of
default have become political bargaining chips in the debate over fiscal
policy. Despite this year's wide-ranging debate, in our view, the differences between
political parties have proven to be extraordinarily difficult to bridge, and,
as we see it, the resulting agreement fell well short of the comprehensive
fiscal consolidation program that some proponents had envisaged until quite
recently. Republicans and Democrats have only been able to agree to relatively
modest savings on discretionary spending while delegating to the Select
Committee decisions on more comprehensive measures. It appears that for now,
new revenues have dropped down on the menu of policy options. In addition, the
plan envisions only minor policy changes on Medicare and little change in other
entitlements,
the containment of which we and most other
independent observers regard as key to long-term fiscal sustainability.
Our opinion is that elected officials remain
wary of tackling the structural issues required to effectively address the
rising U.S. public debt burden in a manner consistent with a 'AAA' rating and
with 'AAA' rated sovereign peers (see Sovereign
Government Rating Methodology and Assumptions," June 30, 2011,
especially Paragraphs 36-41). In our view, the difficulty in framing a
consensus on fiscal policy weakens the government's ability to manage public
finances and diverts attention from the debate over how to achieve more
balanced and dynamic economic growth in an era of fiscal stringency and
private-sector deleveraging (ibid). A new political consensus might (or might
not) emerge after the 2012 elections, but we believe that by then, the
government debt burden will likely be higher, the needed medium-term fiscal
adjustment potentially greater, and the inflection point on the U.S.
population's demographics and other age-related spending drivers closer at hand
(see "Global Aging
2011: In The U.S., Going Gray Will Likely Cost Even More Green, Now,"
June 21, 2011).
Standard & Poor's takes no position on
the mix of spending and revenue measures that Congress and the Administration
might conclude is appropriate for putting the U.S.'s finances on a sustainable
footing.
The act calls for as much as $2.4 trillion
of reductions in expenditure growth over the 10 years through 2021. These cuts
will be implemented in two steps: the $917 billion agreed to initially,
followed by an additional $1.5 trillion that the newly formed Congressional
Joint Select Committee on Deficit Reduction is supposed to recommend by
November 2011. The act contains no measures to raise taxes or otherwise enhance
revenues, though the committee could recommend them.
The act further provides that if Congress
does not enact the committee's recommendations, cuts of $1.2 trillion will be
implemented over the same time period. The reductions would mainly affect
outlays for civilian discretionary spending, defense, and Medicare. We
understand that this fall-back mechanism is designed to encourage Congress to
embrace a more balanced mix of expenditure savings, as the committee might
recommend.
We note that in a letter to Congress on Aug.
1, 2011, the Congressional Budget Office (CBO) estimated total budgetary
savings under the act to be at least $2.1 trillion over the next 10 years
relative to its baseline assumptions. In updating our own fiscal projections,
with certain modifications outlined below, we have relied on the CBO's latest
"Alternate Fiscal Scenario" of June 2011, updated to include the CBO
assumptions contained in its Aug. 1 letter to Congress. In general, the CBO's
"Alternate Fiscal Scenario" assumes a continuation of recent
Congressional action overriding existing law.
We view the act's measures as a step toward
fiscal consolidation. However, this is within the framework of a legislative
mechanism that leaves open the details of what is finally agreed to until the
end of 2011, and Congress and the Administration could modify any agreement in
the future. Even assuming that at least $2.1 trillion of the spending
reductions the act envisages are implemented, we maintain our view that the
U.S. net general government debt burden (all levels of government combined,
excluding liquid financial assets) will likely continue to grow. Under our
revised base case fiscal scenario--which we consider to be consistent with a
'AA+' long-term rating and a negative outlook--we now project that net general
government debt would rise from an estimated 74% of GDP by the end of 2011 to
79% in 2015 and 85% by 2021. Even the projected 2015 ratio of sovereign
indebtedness is high in relation to those of peer credits and, as noted, would
continue to rise under the act's revised policy settings.
Compared with previous projections, our
revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to
expire by the end of 2012, remain in place. We have changed our assumption on
this because the majority of Republicans in Congress continue to resist any
measure that would raise revenues, a position we believe Congress reinforced by
passing the act. Key macroeconomic assumptions in the base case scenario
include trend real GDP growth of 3% and consumer price inflation near 2%
annually over the decade.
Our revised upside scenario--which, other
things being equal, we view as consistent with the outlook on the 'AA+'
long-term rating being revised to stable--retains these same macroeconomic
assumptions. In addition, it incorporates $950 billion of new revenues on the
assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013
onwards, as the Administration is advocating. In this scenario, we project that
the net general government debt would rise from an estimated 74% of GDP by the
end of 2011 to 77% in 2015 and to 78% by 2021.
Our revised downside scenario--which, other
things being equal, we view as being consistent with a possible further
downgrade to a 'AA' long-term rating--features less-favorable macroeconomic
assumptions, as outlined below and also assumes that the second round of
spending cuts (at least $1.2 trillion) that the act calls for does not occur.
This scenario also assumes somewhat higher nominal interest rates for U.S.
Treasuries. We still believe that the role of the U.S. dollar as the key
reserve currency confers a government funding advantage, one that could change
only slowly over time, and that Fed policy might lean toward continued loose
monetary policy at a time of fiscal tightening. Nonetheless, it is possible
that interest rates could rise if investors re-price relative risks. As a
result, our alternate scenario factors in a 50 basis point (bp)-75 bp rise in
10-year bond yields relative to the base and upside cases from 2013 onwards. In
this scenario, we project the net public debt burden would rise from 74% of GDP
in 2011 to 90% in 2015 and to 101% by 2021.
Our revised scenarios also take into account
the significant negative revisions to historical GDP data that the Bureau of
Economic Analysis announced on July 29. From our perspective, the effect of
these revisions underscores two related points when evaluating the likely debt
trajectory of the U.S. government. First, the revisions show that the recent
recession was deeper than previously assumed, so the GDP this year is lower
than previously thought in both nominal and real terms. Consequently, the debt
burden is slightly higher. Second, the revised data highlight the sub-par path
of the current economic recovery when compared with rebounds following previous
post-war recessions. We believe the sluggish pace of the current economic
recovery could be consistent with the experiences of countries that have had
financial crises in which the slow process of debt deleveraging in the private
sector leads to a persistent drag on demand. As a result, our downside case
scenario assumes relatively modest real trend GDP growth of 2.5% and inflation
of near 1.5% annually going forward.
When comparing the U.S. to sovereigns with
'AAA' long-term ratings that we view as relevant peers--Canada, France,
Germany, and the U.K.--we also observe, based on our base case scenarios for
each, that the trajectory of the U.S.'s net public debt is diverging from the
others. Including the U.S., we estimate that these five sovereigns will have
net general government debt to GDP ratios this year ranging from 34% (Canada)
to 80% (the U.K.), with the U.S. debt burden at 74%. By 2015, we project that
their net public debt to GDP ratios will range between 30% (lowest, Canada) and
83% (highest, France), with the U.S. debt burden at 79%. However, in contrast
with the U.S., we project that the net public debt burdens of these other
sovereigns will begin to decline, either before or by 2015.
Standard & Poor's transfer T&C
assessment of the U.S. remains 'AAA'. Our T&C assessment reflects our view
of the likelihood of the sovereign restricting other public and private
issuers' access to foreign exchange needed to meet debt service. Although in
our view the credit standing of the U.S. government has deteriorated modestly,
we see little indication that official interference of this kind is entering
onto the policy agenda of either Congress or the Administration. Consequently,
we continue to view this risk as being highly remote.
The outlook on the long-term rating is
negative. As our downside alternate fiscal scenario illustrates, a higher public
debt trajectory than we currently assume could lead us to lower the long-term
rating again. On the other hand, as our upside scenario highlights, if the
recommendations of the Congressional Joint Select Committee on Deficit
Reduction--independently or coupled with other initiatives, such as the lapsing
of the 2001 and 2003 tax cuts for high earners--lead to fiscal consolidation
measures beyond the minimum mandated, and we believe they are likely to slow
the deterioration of the government's debt dynamics, the long-term rating could
stabilize at 'AA+'.
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.63.85 |
|
|
1 |
Rs.98.12 |
|
Euro |
1 |
Rs.71.28 |
INFORMATION DETAILS
|
Analysis Done by
: |
KAR |
|
|
|
|
Report Prepared
by : |
ASH |
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest capability
for timely payment of interest and principal sums |
Unlimited |
|
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
|
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
|
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
|
-- |
NB |
New Business |
-- |
|
This score serves as a reference to assess
SC’s credit risk and to set the amount of credit to be extended. It is
calculated from a composite of weighted scores obtained from each of the major sections
of this report. The assessed factors and their relative weights (as indicated
through %) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend (10%) Operational size
(10%)
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.